India has changed its startup rules for deep tech

Deep technology startups in industries like space, semiconductors, and biotechnology have longer development cycles compared to traditional ventures. In response, India is making adjustments to its startup regulations and leveraging public funding to support these startups in bringing their innovations to market.

Recently, the Indian government updated its startup framework by extending the period during which deep tech companies are considered startups to 20 years and increasing the revenue threshold for startup-specific benefits to ₹3 billion (approximately $33.12 million). This change is aimed at aligning policy timelines with the complex development processes of science- and engineering-driven businesses.

Moreover, this adjustment is part of India’s strategy to cultivate a long-term deep tech ecosystem by combining regulatory reforms with public funding, including the ₹1 trillion (around $11 billion) Research, Development and Innovation Fund (RDI) introduced last year. This fund is designed to provide patient capital for science-led and research-intensive companies. In line with this initiative, U.S. and Indian venture capital firms have collaborated to establish the India Deep Tech Alliance, a private investor coalition with over $1 billion in funding, including prominent names like Accel, Blume Ventures, Celesta Capital, and Qualcomm Ventures.

The policy changes aim to alleviate the challenges faced by founders of deep tech startups in navigating fundraising, securing follow-on capital, and engaging with governmental entities. Vishesh Rajaram, from Speciale Invest, emphasized that these adjustments recognize the unique nature of deep tech ventures and reduce obstacles in the operational journey of founders.

Despite these positive changes, the availability of capital remains a critical concern for deep tech companies, especially beyond the initial stages of development. The RDI Fund is expected to address this funding gap by providing support to deep tech startups during early and growth stages, as noted by Arun Kumar of Celesta Capital.

Siddarth Pai, of 3one4 Capital and the Indian Venture and Alternate Capital Association, highlighted that India’s deep tech framework aims to avoid abrupt transitions that could impede companies’ growth as they scale up.

As the RDI Fund begins to take shape operationally, there is optimism about its potential impact on the deep tech ecosystem. The fund is structured to not only provide capital through venture funds but also offer direct investments, credit facilities, and grants to support deep tech startups.

India’s deep tech funding landscape

Although India’s deep tech market is still emerging, recent data indicates a positive trend in funding activities. In 2025, Indian deep tech startups raised $1.65 billion, reflecting a resurgence in investor confidence, particularly in sectors aligned with national priorities like advanced manufacturing, defense, and climate technologies.

Compared to the U.S. and China, India’s deep tech funding amounts are relatively lower, underscoring the challenge of building capital-intensive technologies despite having a strong pool of engineering talent. The recent policy changes are expected to attract more investor participation in the medium to long term.

A strategic shift

The recent regulatory changes in India are seen as a signal of the government’s commitment to supporting deep tech innovation over the long term. This move provides investors with assurance that policy frameworks will remain consistent throughout the multi-year lifecycles of deep tech startups. While the impact on investment models may not be immediate, it fosters confidence among investors in India’s dedication to nurturing long-horizon technologies.

Pratik Agarwal, a partner at Accel, noted that the policy adjustment reflects India’s efforts to create a conducive environment for frontier technologies, drawing inspiration from established innovation ecosystems in the U.S. and Europe.

The extended policy horizon may encourage deep tech startups to remain in India as they grow, supported by a favorable regulatory environment. While challenges related to capital and market access persist, the evolving landscape, including a growing interest in tech companies on public markets, could incentivize startups to stay domestic.

Ultimately, the success of India’s deep tech ecosystem will be measured by the emergence of globally competitive companies. Arun Kumar of Celesta Capital highlighted the importance of Indian deep tech firms achieving sustained success on the global stage as a key indicator of the ecosystem’s maturity.